A veteran bank analyst warned investors away from First Chicago NBD on Thursday, saying the stock was overvalued.

George M. Salem of Gerard Klauer Mattison & Co. urged clients to switch to Chase Manhattan Corp. or NationsBank Corp. shares because the premium is unwarranted.

Mr. Salem projected that the 1998 price-to-earnings ratio for First Chicago would be 14.9 times book, which is higher than multiples for BankAmerica Corp., J.P Morgan & Co., Citicorp, and Bank of New York. The group average, he pointed out, is 13 times earnings.

"First Chicago does not yet deserve a premium price-earnings ratio based on its record and prospects," contended Mr. Salem in a new report.

First Chicago shares dropped $2.187, to $76.125, on a day when banks fell sharply.

The 16% surge in First Chicago NBD's stock in the past eight trading days is the result of a recent upgrade by analysts at Donaldson Lufkin Jenrette Securities Corp. and a swirl of merger rumors, noted Mr. Salem.

Less than a week ago reports that BankAmerica Corp., Banc One Corp., and NationsBank were prospective buyers of Chicago's biggest banking company forced the stock up 4.6%.

Mr. Salem dismissed such scuttlebutt, asserting that First Chicago "is just too big to be bought" and has a host of credit card-related problems that make it unattractive to buyers.

"I would put low odds on BankAmerica buying First Chicago because BankAmerica is focusing on improving its return on equity internally and the Street loves their strategy," said Mr. Salem.

"They would also have a problem with antitrust laws after already buying Continental." BankAmerica acquired Chicago's Continental Bank Corp. three years ago.

Banc One is also an unlikely candidate simply because it only recently completed its acquisition of First USA, added Mr. Salem.

First Chicago would cost an estimated $27 billion to buy-a far-too-hefty price for a company that has $17 billion in credit card outstandings and nearly an 8% loss ratio, said Mr. Salem.

He also pointed out that First Chicago's losses, which are the highest among five major bank credit card issuers, have been rising steadily since 1995.

"Their card losses are still rising," said Mr. Salem. "Where is the turnaround?"

In other news, Raymond James & Associates, St. Petersburg, Fla., awarded "buy" recommendations to BankUnited Financial Corp. and a host of other Florida banks, shortly after Wachovia Corp. announced its deal to acquire Florida's 1st United Bancorp., Boca Raton.

Analyst Richard X. Bove said that Wachovia must buy other banks and thrifts in Florida to make its 1st United deal count.

"Wachovia has to make another five or six acquisitions in Florida, otherwise what they have done is just a waste," said Mr. Bove of the $222 million acquisition. "They have to get $5 billion to $10 billion in asset size for anybody to know that they exist in Florida."

Wachovia is not the only bank looking to acquire banks in Florida. According to Mr. Bove, Barnett Banks must also make acquisitions to maintain its dominant market share in the Sunshine State.

He said First Union Corp. and four small banks are also looking hard for acquisitions.

"With 700 people a day moving to Florida, the small banks have become a reasonable size for acquisition." said Mr. Bove. "I expect acquisitions to occur in the next 12 to 18 months."

Mr. Bove also upgraded Harbor Florida Bancorp, First Palm Beach Bancorp, and Seacoast Banking Corp. He urged investors to buy shares in at least five to six small banks and thrifts in Florida to take advantage of coming merger activity.

"I wish we covered more Florida banks," said Mr. Bove. "I would put 'buys' on all of them."

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